I’ve heard time and time again, from many people, both investors and non-investors that everyone got COVID-19 wrong. It’s business as usual, and the property market is continuing to boom.
I’ve seen people putting out media, literature, podcasts, and all manner of alleged expert content saying now has never been a better time. One particular prominent property commentator talked about us being at the beginning of a new cycle, which is now the time to invest.
On the other hand, I would say that we need to be mindful that we are still in a significantly vulnerable position from an economic point of view.
Whether the market continues to chug upwards or whether we have a bit of a tsunami at this point, is anybody’s guess, and I’m not going to speculate what will happen.
What I do know is, what has happened has been a massive fracture on our psyche and has caused untold economic damage, which has not really, fortunately, filtered into most average Australian and New Zealanders’ everyday existence.
However, that does NOT mean it is business as usual.
I definitely relate to those investors who may be feeling a little uneasy about a lot of the push to jump back into more property deals.
I believe that this is the calm before the storm and that there’s a lot of marketers and property people who may be well-intentioned, but who are trying to exploit the uncertainty.
Approaching Investments with More Caution
Now, what I would say is that I do believe that as a good investor, you should always be looking for an opportunity in every market.
And I would absolutely say that there are good deals out there right now. But I would also argue that you have to go into these investment deals with your eyes wide open.
There is definitely a huge cohort of people operating from a space of FOMO (the fear of missing out) right now.
But, remember, it wasn’t too long ago that we saw a lot of fear of not getting out.
It’s easy to get swept up in whatever the media is saying, and right now the media is saying that it’s business as usual and I just don’t believe it is business as usual.
I believe we are in the eye of the storm where maybe there’s a little bit of calm, but it doesn’t mean the storm isn’t happening.
Finding Recession-Proof Properties
I’m not trying to scare you from making decisions.
What I’m trying to encourage you to do is focus on the strategies which you believe are going to be most recession-resistant.
I don’t believe this is the time to be taking a chance on buying any investments that are of a speculative grade.
I’m at a point in my investing journey where cash flow strategies bring more stability to my portfolio. I’ve got enough capital and enough equity that I’ll be okay regardless of whether the market goes up, down or sideways.
What will make the most significant difference over the next five years is cash flow from my recession-resistant investments. And that is why for me, it’s not business as usual.
I’m not trying to find investments that will have massive capital growth. I’m looking for a stable and predictable income from investments that generate an income no matter what happens in the property market.
I don’t want to be agonising about the economic impact of a recession on those investments.
De-Risking Vulnerable Assets
When you’re thinking about your investments in the coming weeks and months, consider where your vulnerabilities are.
For example, if you’ve got investments in areas where there’s a bit of vulnerability and uncertainty; or where you’re going to be in substantial financial pain if those assets don’t perform – de-risk those first before you take on any more investments.
Once you’ve eliminated all of the high-risk investments in your portfolio, then you can start focusing on where you can put your money to give yourself the highest probability of success over the next three to five years.
Cash Is King
It’s my personal opinion that the next five to ten years will continue to be rocky in different ways for different people.
I think many businesses are in trouble right now, and the ripple effects of that have not yet been felt.
And so from an investing point of view, we want to be cautious. We don’t want to be taking on projects, which are biting off more than we can chew. Unfortunately, Australians tend to chase investments that appear to be the most lucrative in terms of the highest perceived gain over time.
It’s normal when we’re in the early stages of our investment career to be thinking about getting the most significant gains in the shortest possible period. There are definitely opportunities in every market scenario and in every market condition to do just that.
But I also think there is a time and a place to be aggressive for more speculative deals, and there’s a time to batten down the hatches and focus on deals that will give you the most certainty and the highest probability of success.
In times of uncertainty, there is no question that cash is king. Your greatest shield to weathering economic turbulence is holding assets, which deliver significant cash flow.
Key Takeaways
Suppose you’re a business owner who recognises the importance of building wealth outside of your business. In that case, it’s essential to be aware that, even if you’re doing okay right now, it definitely isn’t business as usual.
Let’s try and help as many people be sensible about their investment decision-making over the next few years, while we wait for the COVID-19 pandemic and the consequent economic ripples work its way through the system.
If you’re interested in fast-tracking towards being financially free; please check out my programs, where I help you get onto the path of generating passive income through investing or get in touch today!
